Evolution of the Direct Market Part II

I began my view of the history of the Direct Market last week, starting with a
brief overview of how Phil Seuling was able to convince the large comics publishers
to allow him to distribute comics directly to the new breed of comics specialty
stores that were cropping up around the world. Phil's creation was an immediate
success, but not only for the reasons originally envisioned. It had been presumed
by all involved right from the beginning that Phil would be able to provide a
better level of service to comics shops than they were currently receiving from
the approximately 500 Independent (ID) wholesalers in America. That certainly
proved to be true, especially since most of the ID wholesalers were indifferent
to distributing comics. As my local wholesaler once candidly pointed out to me,
it cost him exactly the same labor to distribute comics as it did to distribute
PLAYBOY or BETTER HOMES & GARDENS, but due to the dramatically lower cover prices
on comics, the earnings were vastly less. As far as he was concerned, if comics
disappeared entirely, he would be delighted.

Given this low level of profitability per unit (5 cents per issue on a 25 cent
cover price comic), is it any wonder that it often seemed that the only wholesalers
eager to handle comics during the early 1970's (as I've mentioned in previous
columns) were the ones actively involved in low grade organized crime, ripping
off the comics publishers through the mechanism of "affidavit returns?" Clearly,
Phil's scheme of buying comics outright (with no return privilege) for 60% off of
cover price (the same discount the comics publishers granted the 7 (?) master
national wholesalers (such as Kable News and Curtis)) was vastly more appealing to
the comics publishers than dealing with the vast numbers of unsold returns coming
back from the 500 local ID wholesalers.

The one huge benefit that Phil extracted from the publishers is that they shipped
his books for him, directly to his retail accounts. This ultimately proved to be
his downfall, but in the beginning was absolutely wonderful. To understand how this
worked, you have to first know that during the 1960's and 1970's an astounding number
of magazines, and almost all comics, were published at 4 immense printing plants in
southern Illinois. These plants were part of the Spartan/World Color Press Publishing
empire, which at the time printed vastly more magazines in the USA than any other
company. The reason for this near monopoly on magazine publishing is that Spartan
could provide publishers with a uniquely integrated system of shipping of their
products to the 500 ID wholesalers. Integrated shipping meant that an ID wholesaler
(such as the one who controlled all magazine sales in the Boulder, Colorado region)
could receive a single massive shipment each week, containing almost all of the
magazines that they had ordered. This was only possible because Spartan printed
practically all of the magazines, and then sent them to a central breakdown warehouse,
where magazines were then allocated to each local ID distributor based on their orders.
The savings in shipping costs resulting from this integration were huge, and they acted
as an overwhelming incentive for all comics and magazine publishers to stick with
printing through Spartan/World Color Press for decades.

When Phil set up his new Direct Market distribution system, the first thing he asked
for was an integrated shipping system, based at Spartan/World Color Press. I'm not
sure how it was ultimately arranged, or who shouldered which costs, but the end result
was that Phil was able to ship comics from all the comics publishers in a single box
(or boxes) directly to the store that ordered them. Even better, the shipping was free!
This meant that comics shop owners, who previously had to purchase their books at a
meager 30% discount off of cover price through their local ID wholesaler, could now get
their comics at 40% off, as long as they were willing to take them on a non-returnable
basis. This was literally a no-brainer in those early days of the Direct Market, as back
issues were in such short supply that it was standard policy that if a comic didn't sell
within it's normal 30 day period after publication, you took it off the new comics rack,
bagged it, and raised the price to a minimum of fifty cents. In those wonderful early
days, unsold new comics were a benefit to comics shops, not a detriment, so ordering
non-returnable clearly made economic sense.

All of the above was clearly envisioned by Phil, and made his new system an immediate
success. What I don't believe he anticipated, however, was the additional benefit of
timeliness. As I alluded to earlier, most of the 500 regional ID wholesalers had
territories in which they controlled all distribution of comics, magazines, and paperback
books. They defended these territories vigorously, both through interlocking personal
agreements, and sometimes through violence. These were not guys that you willingly
provoked. That having been said, monopolies frequently tend to breed inefficiencies.
In the case of comics distribution, it was not unusual for an ID to wait for over a
week to finally break down his new comics shipment, and send it out in trucks to be
delivered to his various newsstands. They would usually begin this distribution with
the newsstands that they personally owned in their region, and then gradually expand
their deliveries through a daily route system. The net result of this behavior was that
it could take as long as two weeks for comics to be distributed in a given area after
they had been received.

Speaking as a comics retailer who received my deliveries from Seagate (Phil's distribution
company) 7 days ahead of distribution by my local ID wholesaler, I can absolutely attest
to the overwhelming benefit that timeliness had on my sales. In my case, I was not only
friends with my local ID, but Emil Clausen, of Columbine News, was also my mentor. He
not only granted me extended credit during the very early days when I had almost no
assets, but he also spent hours teaching me about how ID distribution functioned. Emil
was one of the first ID's to embrace computer analysis of distribution trends, so his
guidance was invaluable to my getting started. One early bit of critical data that he
provided me is that 70% of the sales on a given comic book or magazine are achieved
within the first 10 days after it is placed on newsstands. I found that proved to be
especially true in comics, where fans were very eager to read the next installment of
a continued story. By ordering through Phil, I was able to beat Emil's system by 7 days.
As a direct result, based on numbers provided by Emil, I know that I captured about 50%
of the total new comics volume in the Boulder region within just 12 months. Based on
conversations I've had with other comics retailers from those early days, this huge
timing advantage was the primary catalyst for the explosive growth in comics shops
throughout the country during the 1972-1977 period. For shops out of the country
(such as Forbidden Planet in London) Phil's distribution was an even greater advantage,
as traditional ID wholesaler new comics shipments to International destinations could
frequently take three months! In a nutshell, the fantastic timing efficiency provided
by Seagate ultimately set the stage for the complete destruction of ID wholesaler comics
distribution.